The executive order bans the export of goods, technology, and services to the Crimea region of Ukraine, but that’s not all it does.

On December 19, 2014, U.S. President Barack Obama issued Executive Order #13685, “Blocking Property of Certain Persons and Prohibiting Certain Transactions with Respect to the Crimea Region of Ukraine.” The executive order became effective at 3:30 p.m. eastern time that day, subject to two general license exceptions, and it prohibits all of the following:

• New investment in the Crimea region of Ukraine by a U.S. Person, wherever located

• The importation into the United States, directly or indirectly, of any goods, services, or technology from the Crimea region of Ukraine

• The exportation, reexportation, sale, or supply, directly or indirectly, from the United States or by a U.S. Person, wherever located, of any U.S.-origin and/or non-U.S.origin goods, services, or technology to the Crimea region of Ukraine

• Any approval, financing, facilitation, or guarantee by a U.S. Person, wherever located, of a transaction by a foreign person where the transaction by that foreign person would be prohibited by Executive Order #13685 if performed by a U.S. Person or within the United States

Neither the executive order’s nor the Office of Foreign Assets Control’s (OFAC’s) Ukraine-related sanctions regulations define “new investment.” Accordingly, we would expect OFAC to apply a broad definition that would encompass any type of investment made by a U.S. Person on or after December 19, 2014 in any amount of value in any economic sector.

On December 30, 2014, OFAC issued General License #5, “Authorizing Certain Activities Prohibited by Executive Order 13685 of December 19, 2014 Necessary to Wind Down Operations Involving the Crimea Region of Ukraine.” General License #5 does not address authorization for any wind-down activities undertaken between December 19 and December 30, 2014. Presumably, OFAC would be disinclined to bring an enforcement action for wind-down activities undertaken within this 11-day window, in light of the issuance of General License #5.

General License #5 authorizations are valid until 12:01 a.m. eastern time on February 1, 2015 to wind-down activities that became prohibited on December 19, 2014 under the executive order. General License #5 provides that all transactions and activities prohibited by Executive Order 13685 of December 19, 2014 “that are ordinarily incident and necessary” to the following are authorized:

• The winding down or divestiture or transfer to a foreign person of a U.S. Person's share of ownership, including an equity interest, in pre-December 20, 2014 investments located in the Crimea region of Ukraine

• The winding down of operations, contracts, or other agreements that were in effect prior to December 20, 2014 that involve the exportation, reexportation, sale, or supply of goods, services, or technology to the Crimea region of Ukraine

• The winding down of operations, contracts, or other agreements that were in effect prior to December 20, 2014 that involve the importation of any goods, services, or technology from the Crimea region of Ukraine into the United States

General License #5 does not designate what types of transactions might be “ordinarily incident” to winding down, nor does it say what precisely is “necessary” to winding down.

General License #5 also does not authorize any transactions or dealings otherwise prohibited by another executive order or any transactions or dealings with any specially designated national listed pursuant to any Ukraine-related executive order.

U.S. Persons participating in transactions authorized by General License #5 are required, within 10 business days after the wind-down activities conclude, to file a detailed report with OFAC that includes the parties involved, the type and scope of activities conducted, and the dates of the activities. Failure to comply with this reporting requirement voids the validity of the authority in the general license, and thus the wind-down activities would constitute violations of the executive order.

Also on December 19, 2014, OFAC also issued General License #4, “Authorizing the Exportation or Reexportation of Agricultural Commodities, Medicine, Medical Supplies, and Replacement Parts” to Crimea that would otherwise be prohibited under the executive order. This humanitarian general license is common in many sanctions programs and is intended to minimize the suffering of innocent people in Crimea. General License #4 has several terms and conditions, and U.S. Persons who intend to act under the authorizations contained therein should carefully review the proposed transaction to ensure that they strictly comply with all of these terms and conditions.

In sum, after February 1, 2015, all investments, dealings, and transactions by U.S. Persons with all parties in or relating to Crimea will be prohibited, unless considered humanitarian within the narrow authorizations contained in General License #4.